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Opinion Contributor

Senate called to ease wireless tax load

Wireless consumers are not looking for special treatment, the author writes. | Jay Westcott/POLITICO

By SCOTT MACKEY | 12/5/12 9:30 PM EST

If this past election season taught us anything, it is that Americans are seeking answers to how our elected officials will get the economy back on a path of growth and prosperity. From addressing the fast-approaching fiscal cliff to reforming the Tax Code, there is much to be done during this congressional lame-duck session.

But not every tax issue generates divisive political battles. In my new study, I examine the growing burden of wireless taxes on consumers. Even as wireless service becomes more and more critical to all Americans, rich and poor, governments at all levels have been increasing taxes and fees on wireless users.

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Over the past two years, the typical wireless consumer saw government taxes and fees increase 5.5 percent even though the average wireless bill went down. Wireless consumers now pay the highest combined tax and fee burden since I began tracking rates in 2003. In fact, wireless customers now pay taxes, fees and surcharges nearly 2½ times higher than the average 7.3 percent general sales tax rate imposed on other taxable goods and services.

Nebraska continues to have the highest combined wireless rates in the country — nearly 25 percent. The state of Washington isn’t far behind, with New York, Florida and Illinois all experiencing a wireless tax burden of more than 20 percent.

The primary source of the growing wireless consumer burden during the past two years is the continued increase in obligations imposed by the Federal Communications Commission’s Universal Service Fund. This tax burden has nearly tripled over the past decade. In fact, the 5.82 percent Universal Service Fund rate in 2012 almost exceeds the combined federal rate imposed in 2005 when the 3 percent federal excise tax still applied to wireless service.

State and local governments are also increasing their taxes and fees as well. In fact, some of the highest taxes and fees in the country are levied in nearby Baltimore, where consumers pay $4.00 per line per month, plus the 6 percent state sales tax and a $1.00 monthly 911 fee. The monthly tax on an $80 family plan with four lines in Baltimore exceeds $26 per month. That’s no typo — more than $300 per year in taxes and fees and a tax rate of 33 percent!